When using a perpetual inventory system, why are discounts credited to Inventory?
A)The discounts are debited to discount expense and thus the credit has to be made to merchandise inventory.
B)The discounts reduce the cost of the inventory.
C)The discounts are a reduction of business expenses.
D)None of these answers choices are correct.

Question

Quizplus · Accepted Answer

In a perpetual inventory system, discounts are credited to Inventory because they reduce the cost of acquiring the inventory, thus lowering the recorded cost of the inventory on hand.

When Using a Perpetual Inventory System, Why Are Discounts Credited